Quarterly sales in high-end segment top affordable housing for first time: Report

The Indian office sector across the top eight cities has witnessed transactions of 16.1 million square feet (msf), recording a growth of 17 percent YoY during Q3.

India’s top eight cities for real estate — Delhi NCR, Mumbai, Chennai, Bengaluru, Hyderabad, Kolkata, Pune and Ahmedabad — witnessed sales of 82,612 residential units in the July-September 2023 quarter, recording a growth of 12 percent year on year (YoY).

The third quarter of CY 2023 recorded a six-year high in quarterly sales volumes, a report by real estate consultancy Knight Frank said.

The report, India Real Estate Q3 2023, was released on October 4.

It also said that the Indian office sector across the top eight cities has witnessed transactions of 16.1 million square feet (msf), recording a growth of 17 percent YoY during Q3.

The report pointed out that the share of affordable housing (units below Rs 50 lakh) dropped from 36 percent, with sales of 26,831 units in the third quarter of 2022, to 29 percent with sales of 24,143 units in Q3 2023. Since 2018 year-to-date (YTD), the segment fell 26 percent while the category of houses above the Rs 1-crore mark grew by 175 percent.

"The triple effect of increasing prices, home loan rates and the comparatively adverse impact of the pandemic in this segment continued to weigh down on demand. This is the first time that the quarterly sales share of this segment has been eclipsed by that of the mid as well as premium segments," the report said.

On the other hand, the mid and high-end category of residential properties saw a further rise in sales momentum in Q3CY2023. While properties costing over Rs 1 crore saw an annual rise of 39 percent, the mid-segment of Rs 50 lakh to Rs 1 crore saw a rise of 14 percent YoY in Q3 CY2023.

A total of 28,642 units, with a price tag of Rs 1 crore or above, were sold in Q3 of CY 2023, followed by homes costing Rs 50 lakh to Rs 1 crore, which was recorded at 29,827 units. The affordable segment, or homes less than Rs 50 lakh, saw an annual decline of 10 percent to 24,143 units.

Vivek Rathi, national director of research, Knight Frank India, said that a Rs 40-lakh home costs 7 percent more now due to a continuous increase in home loan rates. Thus, consumers of the affordable segment see challenges in buying properties.

"For a 40-lakh home, there is an effective EMI (equated monthly instalment) increase of 14 percent as compared to the same quarter of last FY. Bengaluru and Hyderabad took the biggest hit when it came to the affordable segment," he added.

While all the larger markets saw a growth in transacted volumes, office demand in the Bengaluru market slowed down after the first two quarters.

In Q3 of CY2023, a 2.1 msf area was transacted in Bengaluru, translating to a YoY drop of 59 percent.

Rathi explained that global headwinds, including recessionary markets in the US and European economies, may have led to this slowdown.

Altogether, the report said new office completions in Q3 of CY2023 touched 11.5 msf across the eight Indian cities. Hyderabad accounted for 46 percent of the additional office space delivery with 5.3 msf, followed by Bengaluru with a new office supply of 4 msf.

Mumbai saw the highest office rental at Rs 113 per sq ft per month, and Kolkata recorded the highest rental appreciation of 10 percent during the quarter, the report added.

It said that global corporates have shown an increased commitment to their India operations by setting up or expanding their Global Capability Centres (GCC) in India, which accounted for 44 percent of the office transactions in the country.

The India-facing businesses or domestic corporations constituted 37 percent of the office transactions accounting for 6 msf in Q3 of CY 2023. With 3.2 msf transactions, Mumbai was the most active office market during Q3 of CY 2023, accounting for 20 percent of the total transactions during the period.